Nokia and Lumia: brand limits and brand limited by competition

Recent media news reported a market share decline of the Finnish mobile phone maker Nokia. Many estimate that Nokia’s market share has come down to touch a low figure of 25%. On the other hand brands such as Samsung, LG and Apple and Micromax have gradually nibbled into the market which once was dominated by Nokia. In terms of market share now Korean brands Samsung and LG enjoy second and third positions with about 16% and 6% share of the market. Iconic brand Apple comfortably sits with a share of close to 4% which places it on the fourth position. Although Nokia still continues to lead the pack in terms of volume , its relative position continues to deteriorate. Rival brands such as Samsung, LG, Micromax, Apple and Blackberry have gradually dented the leader Nokia by market slicing from different sides. The recommended strategy for the market leader is to mount attack on the self and thereby preempt assault by others. Nokia has been slow to build a strong position in adjacent markets which eventually emerge as market grows and consequently stands surrounded by strong brands on the flanks.
Is there something new to the Nokia story?
Many brands credited for having created categories have gone down in similar ways. Pioneer brands succeed by codifying a unique formula/ value based on the market reality of a particular period in time. Often this code gets cast in stone and managers lose vision of the periphery. Consequently an important part of the market reality is filtered out. The category creating or defining brands succeed by getting the customers to converge on to an idea which is actually apprehended from assessing consumer patent and latent motivations. Brand is bestowed with leadership position because a novel idea is singularly appropriated by the first mover. This idea is often product centric because these are category creating brands. Something like what Nokia or Xerox or Thermos or Colgate did. Colgate created toothpaste category and Xerox, photocopying. This is the essence of pioneering. Nokia is associated with ‘connecting people’ even on the go/ mobile as against the communication without mobility.
The product centricity is necessary in brand building for the pioneer because first functionality has to be established. Consequently Nokia brand won trust of people by encoding values such as reliability, robustness, and navigation ease. These are prerequisites for a brand to become credible in the first stage of category evolution. But as the product moves along the timeline, more customers begin to see product’s relevance and this certainly makes the brand bigger. But as market expands so does the diversity of customers and this diversity becomes the breeding ground of competition. Some view this as market expansion while the others see this as market fragmentation.
How do market players behave in such a situation? The response is typically conditioned by what is perceived and what is left out. The incumbent seeks to make the brand ‘relevant’ to the ‘joining’ customers. The strategy for the new brands is opposite. These seek to make the existing brand ‘irrelevant’ for the customers entering the category. Accordingly incumbent ‘adds on’ to what it currently has in a bid to win new customers. But the chink in this strategy gives new players an opportunity to build new brand based on what is ‘added on’ as the central idea of its brand. Consider Nokia’s move into different segments:
Nokia music express
Nokia executive phones
Nokia basic phone
Nokia smart phone
Nokia touch phone

In all of the above cases Nokia is the base on which different functionalities are ‘added’ on to make the brand relevant for an adjacent customer group. This is quite logical from the perspective of the insiders but it may not be so logical from the stand point of the outsiders. View this from customer’s perspective. For a person who wants a smart phone Apple is ‘the’ phone because ‘smartness’ is singularly appropriated by this brand as its ‘core idea’. Apple stands for smart phone whereas Nokia in this context means a phone with added smart applications. Similarly for a music buff, Sony Ericsson is ‘the’ music phone whereas Nokia ExpressMusic is a phone with music related functionality.

Consider the strategy adopted by Korean players. In the smart phone category Samsung instead of using its umbrella corporate name has created a powerful Galaxy brand to compete with Apple. LG in a similar way has made an attempt to slice the smart phones market further by creating a new category of ‘genius’ phones by launching Optimus brand. The emergent customer segments apparently all belong to a category but may be characterized more by differences than commonality. In such cases branding success in one segment imposes barriers to its acceptance by the other segment. Often these barriers are mental rather than real. Hanging too many products on a brand can potentially harm the brand by brand dilution. This move can push the brand toward meaninglessness. There is a limit to which a brand can support product variety. The people who seek product distinction are better satisfied when a different brand is created. Customers are not buyers of averages because no customer is an average of all customers.

 

Nokia is finally waking up to this reality. The company has launched its smart phone‘ Nokia Lumia’. The critical issue is whether people are going to see it as more of a Nokia or Lumia. People wanting to buy a gel toothpaste see more of Colgate in Colgate Max Fresh rather than Max Fresh. And the result is obvious as the brand does not stand anywhere near CloseUp.